While boomers have redefined the way we age, the importance of family has not wavered, and we remain committed to our loved ones.
Boomers are increasingly finding themselves not only struggling to pay their own costs, but having to provide funds to cover medical bills, college loans and utilities for their parents and adult children--which is no easy task in the current economic environment.
I’ve seen this situation first hand; Friends of ours in their late 60s were able to retire three years ago with comfortable savings and a solid retirement package. However, since leaving the workforce, they’ve had to take in an aging mother and have become her sole caregiver and financial supporter. To add to their financial woes, their 48-year-old son had to move back home after losing his job and getting divorced.
Our friends aren’t alone in their struggle to afford their own lifestyle in addition to providing financial support to their kids and parents. A new survey from Ameriprise Financial shows that baby boomers continue to prioritize their family’s needs over their own despite increased uncertainty about their own financial security.
“Family and personal values are important when making any kind of decision, but it can be difficult to prioritize our family members’ needs against our own,” says Susanna DeBaca, vice president of wealth strategies at Ameriprise Financial. “Unfortunately, unconditional financial support can threaten or even sabotage retirement goals and security.”
I chatted with DeBaca to gain more insight into the survey and what boomers need to take into account before lending money to family members.
Boomer: What was the overall goal of the survey and who took part in the survey?
DeBaca: The goal of the survey was to look at three different generations of Americans: baby boomers, their children, and their parents. We wanted a deeper understanding of how each group perceives, talks about, and manages money. We conducted this survey five years ago, and we are able to see how the financial crisis and recession changed people’s personal finance views. Specifically, the survey focused on the three generations with more than 1,000 individuals representing those different groups.
Boomer: What are a few of the top line facts from this survey?
DeBaca: All three generations feel less confident than they did five years, which is not very surprising. In the second phase of the survey, we found boomers are failing to save money for retirement and that they are continuing to support adult children and parents. What is concerning our survey shows that boomers aren’t connecting the dots and are failing to realize that their financial support is hurting their ability to retire. People don't regret providing support to their families, but every generation is worried about the other and their ability to have a secure financial future.
Boomer: How are baby boomers continuing to support adult children and aging parents?
DeBaca: What we found is that 93% of boomers say they have provided some kind of financial support to their children. The support varies from helping them cover college tuition, assistance buying cars, or allowing them to move back home and covering utility and food costs.
In the other direction, 58% of boomers report assisting their parents in some way, but the aid comes in a more basic form: assisting with groceries and paying medical or utility bills.
Boomer: How does boomers’ financial assistance impact their retirement goals?
DeBaca: The results show that only one in four boomers--a little less than 25%--report they are actually putting money away for the future—a decrease from 2007.
Boomers who are actually able to put away money are just trying to maintain what they had. Now in 2012, they are not maintaining any savings goals, and they are falling even more behind on savings for retirement. Our study from five years ago showed people weren’t saving enough back then, and now boomers are that much closer to leaving the workforce. Now, they are going to need to figure out how to increase their savings.
Only 10% of boomers admit that helping their parents has slowed down their retirement savings, while one-third (34%) feel the same about the support they’ve provided their adult children.What we have found is that as long as boomers aren’t taking money out of an employee-sponsored retirement accounts, they don’t think it hurts their retirement savings accounts.
Boomers: Where are boomers coming up with the extra cash to help out others?
DeBaca: They are using the money they may have allocated to regular savings to support parents and adult children, rather than deploying it to other areas. We are not sure how people are making tradeoffs in their everyday life, but when we talk to our advisors, we hear stories about people absorbing this assistance into their regular household budget---which is leading to strain on boomers’ lifestyles and their savings.
“The Boomer” is a column written for adults nearing retirement age and those already in their “golden years.” It will also promote reader interaction by posting e-mail responses and answering reader questions. E-mail your questions or topic ideas to firstname.lastname@example.org.